A leading property lobby has commended comments made by Prime Minister Tony Abbott last week ruling out any changes to negative gearing, saying there is no evidence that the tax drives up house prices or benefits only wwealthy investors.
The Property Council of Australia says that the Prime Minister providing certainty on the future of this tax measure will benefit housing affordability and give average workers who invest in property confidence.
“The data is conclusive – negative gearing in Australia is primarily used by average workers who in the majority, own only one investment property,” Executive Director, Nick Proud said.
“It is great to see the Federal Government providing certainty for the hundreds of thousands of average workers whose modest investments are contributing to housing supply and rental affordability.”
The Australian Council of Social Service (ACOSS) released a report
last week, urging the government to restrict tax deductions for negatively geared property investments, claiming it fuels house prices.
However, Proud says there is no evidence to suggest that negative gearing drives up house prices. In fact, the opposite is true.
“As all parties recognise, the key to making houses more affordable is to increase the supply of new housing stock to better meet demand,” he said.
“New housing supply needs capital to get off the ground, and investors (both foreign and domestic) as well as owner occupiers are a critical source of that capital. Negative gearing unlocks an important source of finance to boost new supply.”
The ACOSS report also claimed negative gearing only benefits wealthy investors.
“It's not your average mum and dad investors on middle incomes who are benefitting from the generous tax concessions that have allowed two thirds of individual rental property investors, or 1.2 million people, to report tax-deductable ‘losses' of $14 billion in 2011,” the report stated.
“The reality is that over half of geared housing investors are in the top 10% of personal taxpayers and 30% earn more than $500,000.”
However, Proud says ATO figures refute this claim.
“The ATO Tax Statistics clearly show that of the almost 1.26 million Australians who declare a net rental loss, 883,325 people earn around $80,000 per annum or less and around 79% of them negatively gear.
“Suggestions that 30%, or 561,000 people, with a geared property earn over $500,000 don’t stack up.”